Sorry – but you must repay £42k pension debt
Mrs S.C. writes: Please help me. I am at my wits’ end. My husband worked for NatWest for 40 years. He retired in 1993 and died in 2011. I informed all the relevant authorities and NatWest when he died, and the bank paid out on a £7,000 insurance policy. Now it says I have been overpaid on his work pension, because the bank did not know he had passed away. I am being threatened with court action and will have to sell my home to pay back the money. YOU sent me a big bundle of papers with your letter, but they were almost all about your income tax, council tax, domestic expenses, or health problems suffered by you and your late husband.
There was nothing to show that you notified the bank’s pension department after your husband died. True, you did claim on a policy issued by National Westminster Life Assurance, but this had no connection to his pension. You and your husband were customers of the life company, just like anyone else.
You have also told me that when you registered your husband’s death, a lady at your local Registrar’s Office said she would notify everyone that needed to know.
However, this would have been impossible. Registrars had no idea whom to contact and it is just not their job to sort out pensions.
When your husband died, his annual pension stood at £20,595. From then on, you were entitled to half of this, starting at £10,297, and with annual increases that took it to £11,693 by last year, when the bank realised your husband was no longer alive.
The bottom line is that you have been overpaid by £42,288, and you believe NatWest is adding interest to this every day.
I asked staff at NatWest’s head office to look into this, and it quickly made clear that no interest is being added to the amount you owe. I was told: ‘We are sympathetic to Mrs C’s position, but we have a duty to recover the money owed to the pension fund.’
However, you will not have to part with a penny unless you decide you want to pay off the debt and can afford to do so. Instead, the pension fund will register a charge against your house. In effect, this is a mortgage with no regular repayments, and the £42,288 will not be collected until the property is sold, either on your death or when you move out.
There are legal expenses involved in this arrangement, but again they will not cost you a penny. NatWest will cover all costs.
I know that you hoped the bank and its pension scheme would simply write off the debt, but this was never an option as you really had been overpaid.
Turning the debt into an interestfree loan, secured against your home, is a fair and sensible way out of an awkward situation.